Strategic Preferential Procurement Policy for Localisation and Inclusive Growth for Micro Small Medium Enterprises (MSMEs) in Gauteng Province

Abstract

The study aims to develop interventions to address the low productive capacity and competitiveness levels of township Micro Small Medium Enterprises (MSMEs) to enable meaningful participation in the mainstream economy. Most township firms continue to be informal and underdeveloped. Despite countless interventions by the development finance institutions, most township enterprises remain perpetual survivalists. The study is anchored upon the neoliberal theory, which emphasizes value for money and market efficiencies in procurement, as well as interventionist theories promoting the inclusion and participation of MSMEs in business, and advocating for the localization of products through various policy interventions. The researcher adopted a mixed-method approach to gather primary and secondary data. Secondary data was used for analysis and supported by the primary information or empirical evidence. The secondary data enriched the research content and complemented the primary data. Databases and reports on township suppliers from the Gauteng Provincial Treasury (Procurement Division) and Gauteng Department of Economic Development helped determine the extent of MSMEs' access to development and financial support opportunities. The study found that the high informality level of township businesses, low level of development, poor economic infrastructure, and lack of access to finance hinder MSMEs' participation in public procurement. Programs and products offered by government agencies do not adequately respond to public procurement challenges facing MSMEs, e.g. product testing and accreditation. The high barriers to entry due to complicated administrative processes and procedures continue to deter MSMEs from participating in the mainstream economy. The Development Finance Institutions (DFIs) were found to be a challenge due to a mismatch between the resource structure to drive economic development and the products offered. The study recommends that to increase the participation of MSMEs in public procurement, there needs to be a targeted growth continuum strategy that tracks interventions from the beginning to the end. Additionally, there needs to be a shift from a quantitative approach with minimal impact to a customised one with qualitative, tangible and tradable products and skills aimed at increasing participation of MSMEs. Furthermore, the political will is required to address the resource mismatch, repurpose resources, or develop specific products by the well-resourced Development Finance Institutions to suit the material conditions of township MSMEs with lesser stringent measures.